Aftermarket Parts Market Consolidation Likely To Increase

By Henry Canaday
Source: Aviation Week & Space Technology
July 22, 2013
Credit: DASI

The long-predicted consolidation of the aviation used-parts business appears to be finally happening, or at least accelerating significantly.

The case for consolidating aircraft aftermarkets, both in repair work and in supply chain provision, always has been strong. The logic is that bigger, more diversified companies can provide more comprehensive services to airlines that want to outsource functions that others can expedite more efficiently.

But several factors have slowed integration.

It can be difficult to find just the right pieces to assemble. Even when the optimum acquisition targets are identified, it can be tough to agree on the acquisition price. And even when the buyer and seller agree on terms, it has been hard to persuade financiers to enable deals in this economic climate where airline revenue, profits and traffic have been so unstable.

But inventories of used parts can be valued more reliably than future profits on repair services. Smart planners can see how different parts stocks complement each other, or do not. And financial markets are apparently shedding at least some of their wariness of aviation. Airlines have proven to be a lot more flexible, and thus survivable, than they often were in the past.

So deals are happening. Two recent transactions are major and probably point the way toward the future shape of the used parts market.

In mid-May, Kellstrom Commercial Aerospace acquired AirLiance Materials from Lufthansa Technik. AirLiance CEO Roscoe Musselwhite became president and CEO of Kellstrom Commercial Aerospace, as the commercial warehousing and logistics operations of Kellstrom move to AirLiance's warehouse near Chicago O'Hare International Airport.

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